What You Don’t know Does Hurt You

8/19/2013

One of the biggest tax stories over the last few years has been the increased focus on offshore accounts and tax havens for U.S. citizens. The Justice Department has made cracking down on secret foreign bank accounts a top priority. Those efforts got a huge boost when Bradley Birkenfeld, a banker for Zurich-based UBS, blew the whistle on the bank's efforts to help U.S. depositors avoid tax on their accounts. UBS settled the case by paying a record 780 million dollar fine and turning over information on nearly 5,000 U.S. depositors.

During this time, the IRS offered an amnesty program for taxpayers who had concealed their accounts to avoid prosecution by coming forward, paying back taxes and fines, and identifying the advisors who helped them hide their assets from the government. Since then, over 38,000 taxpayers have entered the program, paying $5.5 billion and pledging $5 billion more to make good. There was, however, a caveat. In order to qualify, you had to file the disclosure paperwork before another individual or entity told on you. So what happens if you don’t come forward or are too late? Well, if you’re 79-year-old widow Mary Curran, fortunately you’d only receive less than one minute of probation.

In 2000, money manager Mortimer Curran died in Palm Beach. Curran left his wife Mary an account at UBS, which he himself had inherited from an aunt in Monte Carlo. Mary, who has no college education and hasn't worked outside the home in over 50 years, took the bank's advice and left the money in the account. She continued to live modestly in the same house she and Mortimer had bought in 1982, and devoted most of her time to volunteer work on behalf of the Opportunity Inc. Early Childhood Center and the Rehabilitation Center for Children and Adults.

In 2009, after the account had grown to $43 million, she contacted a lawyer. Together, they decided to report her account. Unfortunately, he didn't file the disclosure paperwork until three weeks after UBS had provided her account information as part of its own settlement, which meant she couldn't join the program.

Last November, the Justice Department indicted Mrs. Curran. In January, she pled guilty to two counts of tax evasion, paying $667,700 in back tax and a $26.6 million civil penalty. And on April 13, Curran appeared before U.S. District Court Judge Kenneth Ryskamp for sentencing. She still faced up to 37 months for the crimes she had admitted. Ryskamp sentenced the "unsophisticated" Curran to a year of probation – then immediately revoked it. He stated, "This really is a tragic situation. The government should have used a little more discretion." He even urged Curran's attorney to seek a presidential pardon for his client – then told the prosecutors it would be "spiteful" for them to oppose it.

Mary Curran's five seconds of probation may seem like the lightest possible slap on the wrist, but that $26 million penalty hurts. Regardless of how much money you make or your own financial situation, it’s important to stay informed about your money and be involved in important financial decisions that affect your life!

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